Families miss out on £2,000 in tax-free childcare

18 Feb 20

More than a million parents in the UK are missing out on £2,000 a year by not claiming tax-free childcare.

HMRC statistics found that around 172,000 families are claiming the Government support, up from 125,000 year-on-year.

As 1.3m parents are eligible for the scheme, around 1.1m families are losing out, partly because the system is “too complicated”.

Research from Royal London claimed the typical cost of full-time childcare for a child under the age of two is £12,789.

Getting the full Government tax-free contribution could reduce that bill by 16% a year.

Becky O’Connor, personal finance specialist at Royal London, said:

“The results of this survey two years after tax-free childcare was introduced reveal a widespread lack of awareness and confusion.

“Childcare is an expensive and necessary cost for working parents.

“The Government needs to do more to boost awareness and understanding of the benefits of this scheme, which can save parents thousands of pounds off a full-time pre-school childcare bill every year.”

Tax-free childcare was launched in April 2017 and fully rolled out by February 2018.

Parents can open an account and receive Government contributions to cover childcare costs.

For every £8 they pay into their online account, the Government makes a top-up payment of £2, up to an annual maximum of £2,000 a child.

The scheme generally applies to children under the age of 12, although the entitlement increases to £4,000 for disabled children under 17.

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